Often business owners of start-ups and those that have been operating for some time frequently ask:
- How can I increase sales?
- I need to increase profits as we work so hard but hardly have any
- We’re really worried about our cashflow as we often have trouble paying all our bills
- We’re often wondering if we will have enough cash at the end of the month to pay ourselves. What can we do?
- How do we earn enough to pay our ATO debt back?
- I need more customers. How do we get them?
- We earn enough but we never seem to have any money left over. We don’t know where it goes!
Do any of these resonate with you? If they do, at least you know that you are not alone.
But what can you do about any of them?
Stating the Obvious
In any business you need to:
1. Have a product or service
2. At a price
3. At place
4. For a prospect who is prepared to purchase
5. At least once and hopefully more than once.
From the total sales you will:
1. Cover your costs and expenses
2. Have enough to pay yourself a market wage (at worst the minimum wage) and
3. The business will make a profit which over time
4. Gives you a return on your investment (ROI) in establishing the business and
5. A ROI which rewards you for the risk of investing in the business in the first place.
Yes, this is stating the obvious and may even be simplistic but really, the basics of running a business are simple. The more difficult part is knowing what to do, what can be changed and how much impact will it have?
5 Steps Businesses Forget
When I begin working with a business I conduct what I call 5 Steps to Increase Sales Review. I often refer to them as the 5 Steps Businesses Forget!
Each of these steps help you answer many of the questions and statements mentioned earlier. The key is each step is really an area for analysis. Yet these 5 Steps, by themselves, will yield the approximate revenue of the business.
However, like many models or methods, the best results come from the sum of all the steps taken together. A change of 2 more steps will usually yield far better results than a change in only 1 step.
The 5 Steps to Grow your Business
The image below shows the 5 Steps to Grow Your Business, or as I prefer to call them 5 Steps to Increased $ales.
When working towards changes in any of the above steps you will as a result:
• Increase sales
• Increase profits
• Increase customer retention and repeat sales
So how does this model work?
1. Customers
If your business has made sales you then you have a customer database.
The question to ask is: of the customers in your database, how many are likely to buy from you in the next 12 months?
If you have 1000 will it be 800, or 500 or 200 or 50?
Then it is a quick calculation how much the annual sales revenue will be from the number selected. If they don’t give you enough revenue, then you need change 1 or more of the remaining for Steps by answering these questions
2. Transaction Value
Would the existing customers pay more for my products or services?
This question will help you find ways to increase the price of your products and services. Could you for example:
• Increase the price by a dollar or percentage amount
• Increase your labour charge out rate
• Add a higher price product or service
• Increase the price buy bundling products or services
3. Number of Transactions per Year
Could the existing customers buy more products or use services more frequently? Could you for example:
• Suggest reasons why they should buy more often
• Create marketing campaigns based on a season (real or make believe)
• Make special offers for existing customers
4. New Customers
If the annual revenue for existing customers buying more product more often still doesn’t meet your expectations, then, the balance required will need to come from new customers.
A simple calculation will give you how many new customers are needed. These new customers will come from prospects who are attracted to you by your marketing activities.
5. Prospects
To get the number of new customers required, you need to know what your sales conversion rate is i.e. how many prospects do you usually see/contact before they convert into a customer.
Now you know how many prospects your marketing activity needs to deliver. This in turn will enable you to plan and budget your marketing activities.
A small percentage change in any of these numbers can make a significant difference to the annual sales revenue. In conducting the analysis you will also make savings in costs, effectiveness of marketing and improve productivity which will result in an improvement in your profitability.
Because you will be looking at how, when and where you communicate with customers; you will improve customer relationships; in turn this will lead to increased customer retention and repeat business.
Summary
As you can see the 5 Steps to Grow Your Business are easy. By taking these steps will ultimately enable you to address challenges such as:
• How can I increase sales?
• I need to increase profits as we work so hard but hardly have any
• We’re really worried about our cashflow as we often have trouble paying all our bills
You need only take the time to identify:
1. Existing customers who will buy from you in the next 12 months
2. How many new customers you need
3. How many prospects you need to create the new customers required
4. How you can change the transaction value of purchases
5. How you can increase the number purchases made over the year.
After reading this, can you think of any reason why you wouldn’t take
5 Steps to Grow Your Business?
Ross Keating, The Client Orchardist, has more than 20 years’ experience in helping businesses, which are doing OK but want more sales, to harvest their prospects and customers to harvest more profits from Delighted customers.
For more information contact Ross by email, on Twitter, or LinkedIn. If you would like a free 45 minute chat with Ross about your business click here.
